Toronto contractor Troy Barnes has had a busy few years. With everyone stuck at home during the early days of the pandemic, interest in renovations skyrocketed. Mr. Barnes doubled his work force between 2020 and 2021 and now has 11 employees.
Things are different now: fewer requests for quotes and more people scaling their projects back to save money. He has also noticed more tradespeople looking for work, mostly because they aren’t fully booked for the first time in ages.
“I noted a slowdown starting in last fall, into a complete dead zone in December and January,” Mr. Barnes said. Things may be picking up again, but it’s too soon to tell. “I am seeing people paying attention to the industry and adjusting their strategies based on the interest rate.”
After years of seemingly unbridled, pandemic-fuelled home renovations, there are signs the rush is finally slowing down. Even as the Bank of Canada held its benchmark interest rate steady at its March update, rates remain 4.25 percentage points higher than they were a year ago, undoubtedly leading some homeowners to reconsider taking on additional, pricier debt through their home equity lines of credit (HELOCs), which have traditionally been used to fund renovations.
At the same time, material and labour costs, which spiked during the pandemic, haven’t dropped significantly. (With the notable exception of lumber, which saw prices soar in 2020 because sawmills read the market all wrong, expecting demand to collapse, and shut down production at many of their operations. Since then, normal supply and lower demand have driven prices down sharply from their pandemic highs.) In addition, growing fears of a possible recession have consumers worried about what lies ahead.
Contractors say they’re seeing more cancellations and smaller jobs, with many homeowners stuck with partially completed renos, as more and more of their budgets are consumed each month by the cost of servicing their debts.
Realtor Nasma Ali is seeing it too. Ms. Ali, who works in Toronto, is often the first stop for clients who want contractor recommendations or who are debating whether to renovate or move. She says she first noticed things getting quiet in late summer last year.
“I can’t even remember the last time I had someone ask about a contractor,” she told The Globe and Mail in late February. “The contractors we know are booked up a few months, but after that they don’t have anything. Those projects are probably people who booked them last year.”
She has seen several half-built houses on the market recently, presumably because people started to build and ran out of money. She also knows of people who are partway through a renovation and feel locked in to finishing it even though it has gone way beyond their budget.
“Those people can’t just stop. … You just have to push through it. You’re bleeding money, but at least you can move back,” she said.
“People are just too worried,” Ms. Ali said, noting that HELOCs typically have variable interest rates, so people who borrow today can’t predict what their payments will look like in a few months. “Before, it was free money.”
Ottawa contractor Matt Creamer says he’s seeing something similar, although perhaps a bit less drastic than what Ms. Ali describes in Toronto. He’s still getting jobs and people calling for quotes, but finds many clients are doing less work on their homes than they’d like in order to keep costs in check.
“Everyone is mentioning ‘budget’ a lot more,” said Mr. Creamer, who has reduced the size of his crew from six to four since the height of the pandemic.
“People that are renovating are expecting to spend a fair chunk of cash, but it ends up costing even more than they expect with inflation,” he said. “Prices still haven’t gone all the way back down and probably never will.”
He added that many people have resumed travelling – reclaiming part of the household budget that was temporarily redirected to home improvement.
Everyone interviewed for this story said older or more affluent people seem less concerned about higher interest rates, which may explain why North Vancouver renovator and house flipper Derek Porter says he’s not seeing too much of a change. North Vancouver is one of Canada’s wealthiest cities, and Mr. Porter says renovations there are continuing unabated.
“It’s certainly not [the recession of] 2008. That happened very quickly,” he said, noting that he has heard from employees at his lumber yard that new-home builds have slowed down. He also said the “railing guy” he works with was able to give him a quote on his current project unusually quickly – within two weeks.
“He’s the first person I’ve talked to who said it’s slowing down.”
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